H-2168.1

1986-S AMH REV H2168.1

SHB 1986 - H COMM AMD

By Committee on Revenue

Strike everything after the enacting clause and insert the following:

"NEW SECTION. Sec. 1. (1) The legislature finds that:

(a) Neighborhoods are a powerful indicator of the diversity and health of the state;

(b) There are geographic areas within communities that are characterized by a lack of employment opportunities and high unemployment, by an average income level that is below the median income level for the surrounding community, by a lack of affordable housing, by deteriorating infrastructure, and by a lack of facilities for community services, job training, and education;

(c) Strategies to encourage reinvestment in these neighborhoods by assisting local businesses to become stronger and neighborhood residents to gain economic power involve a variety of activities;

(d) Reinvestment in these neighborhoods cannot be accomplished with only governmental resources and requires a comprehensive approach that integrates various incentives, initiatives, and programs to meet the economic, physical, and social needs of the neighborhood;

(e) Successful neighborhood reinvestment depends on a local government's ability to coordinate public resources in a cohesive strategy designed to leverage long-term private investment;

(f) Neighborhood reinvestment can strengthen the overall community tax base through increased taxes realized from the establishment of new business and physical property improvements;

(g) Local governments, in cooperation with neighborhood residents, can provide leadership as well as planning and coordination of resources and necessary services to address reinvestment in neighborhoods; and

(h) It is in the public interest to adopt a targeted approach to neighborhood reinvestment and enlist the resources of the public and private sectors, and neighborhood groups to revitalize neighborhoods.

(2) The legislature declares that the purposes of the neighborhood reinvestment act are to:

(a) Encourage neighborhood reinvestment through strong partnerships and cooperation between all levels of government, community-based organizations, neighborhood residents, and the private sector;

(b) Involve and educate the private sector and stimulate private reinvestment through the judicious use of public resources;

(d) Include neighborhood individuals and organizations in the policy-making process.

PART I -- GENERAL PROVISIONS AND POLICIES

NEW SECTION. Sec. 101. (1) It is the goal of the state of Washington to create an environment that fosters economic reinvestment and empowerment of neighborhood residents through public and private sectors, and neighborhood efforts. The legislature declares that attainment of that goal is a state priority.

(2) The objectives of the neighborhood reinvestment act are to attain the state's goal of economic reinvestment and empowerment of neighborhood residents by working with the public and private sectors, and neighborhood residents to:

(a) Develop local comprehensive neighborhood reinvestment strategies that reflect the diverse elements of the neighborhood;

(b) Expand homeownership and rental housing opportunities;

(d) Link housing and supportive services;

(e) Revitalize the physical infrastructure;

(f) Develop new private investment in the neighborhood; and

(g) Stimulate neighborhood business development and retention.

NEW SECTION. Sec. 102. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Affordable housing" means residential housing that is rented or owned by a person or household whose monthly housing costs, including utilities other than telephone, do not exceed thirty percent of the household's monthly income.

(2) "Business firm" means any incorporated or unincorporated business entity authorized to do business in the state of Washington and subject to the state's business and occupation taxes levied in chapter 82.04 RCW.

(3) "Community service" means any type of counseling and advice, emergency assistance, or medical care furnished to individuals or groups in a designated neighborhood reinvestment area.

(4) "Crime prevention" means any activity that aids in the reduction of crime in a designated neighborhood reinvestment area.

(5) "Designated neighborhood reinvestment area" means a geographic area within the boundaries of a local government that meets the requirements of section 104 of this act and is so designated by the director of the department of community development.

(6) "Education" means any type of scholastic instruction or scholarship assistance to any person who resides in a designated neighborhood reinvestment area that enable that person to prepare for better employment opportunities.

(7) "Housing assistance" means any activity that aids in the acquisition, preservation, rehabilitation, or construction of affordable housing within a designated neighborhood reinvestment area.

(8) "Job training" means any type of instruction to any person who resides in a designated neighborhood reinvestment area that enable that person to acquire vocational skills to become employable or seek a higher grade of employment.

(9) "Local government" means a city, town, or county.

(10) "Neighborhood assistance" means furnishing financial assistance, labor, material, or technical assistance to aid in the provision of community services, crime prevention, education, job training, and housing assistance activities in a designated neighborhood reinvestment area.

(11) "Nonprofit organization" means any public or private nonprofit organization that: (a) Is organized under federal, state, or local laws; (b) has no part of its net earnings inuring to the benefit of any member, founder, contributor, or individual; and (c) has among its purposes significant activities related to neighborhood assistance activities in designated neighborhood reinvestment areas. The term also includes public housing authorities created under chapter 35.82 RCW and public corporations created under chapter 35.21 RCW that are located in designated neighborhood reinvestment areas.

NEW SECTION. Sec. 103. (1) Any local government may apply to the director of the department of community development for designation of an area within the local government as a designated neighborhood reinvestment area.

(2) The application shall be in the form and manner and contain such information as the director of the department of community development may, by rule, determine, provided that the application for designation shall:

(a) Contain information sufficient for the director of the department of community development to determine if the criteria established in section 104 of this act have been met.

(b) Be submitted on behalf of the local government by its chief elected official, or, if none, by the governing body of the local government.

(c) Contain a five-year neighborhood reinvestment plan that describes the proposed designated neighborhood reinvestment area's community development needs and present a strategy for meeting those needs. The plan shall address the following categories: Housing needs; public infrastructure needs, such as transportation, water, sanitation, energy, and drainage/flood control; other public facilities needs, such as neighborhood facilities or facilities for provision of health, education, recreation, public safety, or other services; community economic development needs, such as commercial/industrial revitalization, job creation and retention considering the unemployment and underemployment of area residents, accessibility to financial resources by area residents and businesses, investment within the area, or other related components of community economic development; and social service needs.

The local government is required to provide a description of its strategy for meeting the needs identified in this subsection (2)(c). As part of the strategy, the local government is required to identify the needs for which specific plans are currently in place and the source of funds expected to be used. For the balance of the area's needs, the local government must identify the source of funds expected to become available during the next two-year period and actions the local government will take to acquire those funds.

(d) Certify that neighborhood residents were given the opportunity to participate in the development of the five-year neighborhood reinvestment strategy required under (c) of this subsection.

(3) No local government shall submit more than two neighborhoods to the director of the department of community development for possible designation as a designated neighborhood reinvestment area under this section.

(4)(a) Within ninety days after January 1, 1994, the director of the department of community development may designate up to six designated neighborhood reinvestment areas from among the applications eligible for designation as a designated neighborhood reinvestment area under this section. The director of the department of community development shall make determinations of designated neighborhood reinvestment areas on the basis of the following factors:

(i) The strength and quality of the local government commitments to meet the needs identified in the five-year neighborhood reinvestment plan required under this section.

(ii) The level of private commitments by private entities of additional resources and contribution to the designated neighborhood reinvestment area.

(iii) The potential for reinvestment in the area as a result of designation as a designated neighborhood reinvestment area.

(iv) Other factors the director of the department of community development deems necessary.

(b) The determination of the director of the department of community development as to the areas designated as neighborhood reinvestment areas shall be final.

NEW SECTION. Sec. 104. (1) The director of the department of community development may not designate any area as a designated neighborhood reinvestment area unless that area meets the following requirements:

(a) The area must be designated by the legislative authority of the local government as an area to receive federal, state, and local assistance designed to increase economic, physical, or social activity in the area;

(b) The area must have at least fifty-one percent of the households in the area with incomes at or below eighty percent of the county's median income, adjusted for household size;

(c) The average unemployment rate for the area, for the most recent twelve-month period for which data is available must be at least one hundred twenty percent of the average unemployment rate of the county; and

(d) A five-year neighborhood reinvestment plan for the area that meets the requirements of section 103(2)(c) of this act and as further defined by the director of the department of community development must be adopted.

(2) The director of the department of community development may establish, by rule, such other requirements as the director may reasonably determine necessary and appropriate to assure that the purposes of this section are satisfied.

(3) In determining if an area meets the requirements of this section, the director of the department of community development may consider data provided by the United State bureau of the census from the most recent census or any other reliable data that the director determines to be acceptable for the purposes for which the data is used.

PART II -- BUSINESS AND HOUSING TAX INCENTIVES

Subpart A - Business and Occupation Tax Credits for Contributions

NEW SECTION. Sec. 201. Unless the context clearly requires otherwise, the definitions in this section apply throughout sections 202 through 206 of this act.

(1) "Affordable housing" has the same meaning as in section 102 of this act.

(2) "Business firm" has the same meaning as in section 102 of this act.

(3) "Community service" has the same meaning as in section 102 of this act.

(4) "Crime prevention" has the same meaning as in section 102 of this act.

(5) "Designed neighborhood reinvestment area" has the same meaning as in section 102 of this act.

(6) "Education" has the same meaning as in section 102 of this act.

(7) "Housing assistance" has the same meaning as in section 102 of this act.

(8) "Job training" has the same meaning as in section 102 of this act.

(9) "Neighborhood assistance" has the same meaning as in section 102 of this act.

(10) "Nonprofit organization" has the same meaning as in section 102 of this act.

(11) "Recipient" means the person or business firm receiving tax credits under this chapter.

NEW SECTION. Sec. 202. The department shall establish a program to provide tax credits to business firms making contributions to nonprofit organizations that are undertaking neighborhood assistance activities in designated neighborhood reinvestment areas. The tax credit may be used as a credit against any of the taxes imposed on the business firm under this chapter.

NEW SECTION. Sec. 203. (1) Application for tax credit under this chapter must be made before the actual contribution to the neighborhood assistance activity is made. The application shall be made to the department of community development in a form and manner prescribed by the department of revenue and department of community development.

(2) The department of community development shall transmit a copy of the completed application for tax credits to the department of revenue, with its recommendations, within ten working days after receipt thereof. Within thirty days after receipt of the completed application from the department of community development, the department of revenue shall determine the amount of tax credits to be allocated to the business firm. The department of revenue shall notify the department of community development of its decision within ten working days.

(3) The department of revenue, in consultation with the department of community development, shall adopt rules specifying the administrative procedures applicable to applicants for tax credits, the form and manner in which the applications shall be filed, and the information to be contained therein. The rule shall apply to administrative procedure before the department of revenue and the department of community development.

NEW SECTION. Sec. 204. In order to qualify for the tax credits in section 202 of this act, the neighborhood assistance activity must meet the following requirements:

(1) The neighborhood assistance activity must be located in a designated neighborhood reinvestment area;

(2) The business firm's contribution must be made to a nonprofit organization that is undertaking neighborhood assistance activities that are consistent with the area's five-year neighborhood reinvestment strategy under section 103 of this act.

NEW SECTION. Sec. 205. (1) No tax credit under this chapter for neighborhood assistance activities may be issued after December 31, 2001.

(2) The department shall grant a credit against the tax due under this chapter of an amount equal to fifty percent of the approved amount contributed by the business firm for eligible neighborhood assistance activities in designated neighborhood reinvestment areas during the taxable year.

(3) Any tax credit not used during the taxable year in which the contribution was made may be carried forward for the five immediately succeeding taxable years until the full credit has been used.

(4) The department shall keep a running total of all tax credits granted under this chapter during each fiscal biennium. The department shall not allow any credits that would cause the total tabulation for a biennium to exceed one million dollars. If all or part of an application for credit is disallowed under this subsection, the disallowed portion shall be carried over for approval the next biennium.

(5) No tax credit shall be granted to any bank, bank and trust company, trust company, national bank, savings bank, savings association, or savings and loan association for activities that are a part of its normal course of business.

(6) No recipient is eligible for tax credits in excess of one hundred thousand dollars during the taxable year and no tax credit shall be granted to any business firm for any amount contributed of less than two hundred fifty dollars.

NEW SECTION. Sec. 206. Applications and any other information received by the department under sections 202 through 205 of this act shall not be confidential and shall be subject to disclosure.

Subpart B - Tax Incentives for the Preservation of Affordable Housing

NEW SECTION. Sec. 207. A new section is added to chapter 82.08 RCW to read as follows:

(1) The tax levied by RCW 82.08.020 shall not apply to the retail sale of building materials used in the remodeling, rehabilitation, or new construction of affordable housing or to the labor used to incorporate such building materials into real estate. As used in this section, "affordable housing" is as defined in section 102 of this act.

(2) In order to qualify for the exemption of retail sales tax on materials or labor under this section, the affordable housing must meet the following requirements:

(a) The affordable housing must be located in a designated neighborhood reinvestment area under section 103 of this act;

(b) The affordable housing development must be owned by an organization eligible to receive assistance through the Washington housing trust fund created in chapter 43.185 RCW;

(c) The affordable housing development must contain two or more residential rental dwelling units. Rental units used on a transient basis shall not be considered under this section; and

(d) At least fifty percent of the dwelling units must be set aside for occupancy by households with incomes at or below eighty percent of the median income, adjusted for household size, for the county where the dwelling unit is located for a period of at least twenty-five years.

(3) The department of revenue, in consultation with the department of community development, shall adopt rules specifying the administrative procedures applicable to applicants for exemption from retail sales tax on materials or labor, the form, manner, and time in which applications shall be filed, the information to be contained therein, and criteria for the approval or denial of requests for the exemption from retail sales tax on materials or labor under this chapter. The rules shall apply to both the department of revenue and the department of community development.

(4) The department of revenue shall grant an exemption from retail sales tax on materials or labor for affordable housing that is approved by the department of community development. The department of revenue shall keep a running total of exemptions granted under this section and section 208 of this act during each fiscal biennium. The department of revenue shall not allow any exemption that would cause the total tabulation for a biennium to exceed seven hundred fifty thousand dollars.

(5) This section shall expire January 1, 2002.

NEW SECTION. Sec. 208. A new section is added to chapter 82.12 RCW to read as follows:

(1) The provisions of this chapter shall not apply in respect to the use of building materials used in the remodeling, rehabilitation, or new construction of affordable housing or to the labor used to incorporate such building materials into real estate. As used in this section, "affordable housing" is as defined in section 102 of this act.

(2) In order to qualify for the exemption granted by this section, the affordable housing must meet the following requirements:

(a) The affordable housing must be located in a designated neighborhood reinvestment area under section 103 of this act;

(b) The affordable housing development must be owned by an organization eligible to receive assistance through the Washington housing trust fund created in chapter 43.185 RCW;

(c) The affordable housing development must contain two or more residential rental dwelling units. Rental units used on a transient basis shall not be considered under this section; and

(3) The department of revenue, in consultation with the department of community development, shall adopt rules specifying the administrative procedures applicable to applicants for the tax exemption under this section, the form, manner, and time in which applications shall be filed, the information to be contained therein, and criteria for the approval or denial of requests for the tax exemption under this chapter. The rules shall apply to both the department of revenue and the department of community development.

(4) This section shall expire January 1, 2002.

Subpart C - Tax Incentives for Business Development and Retention

Sec. 209. RCW 82.62.010 and 1988 c 42 s 17 are each amended to read as follows:

Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Applicant" means a person applying for a tax credit under this chapter.

(2) "Department" means the department of revenue.

(3) "Eligible area" means: (a) A county in which the average level of unemployment for the three years before the year in which an application is filed under this chapter exceeds the average state unemployment for those years by twenty percent; ((or)) (b) a metropolitan statistical area, as defined by the office of federal statistical policy and standards, United States department of commerce, in which the average level of unemployment for the calendar year immediately preceding the year in which an application is filed under this chapter exceeds the average state unemployment for such calendar year by twenty percent((~~. Applications under this subsection (3)(b) shall be filed by April 30, 1989~~)); or (c) a designated neighborhood reinvestment area approved under section 103 of this act.

(4)(a) "Eligible business project" means manufacturing or research and development activities which are conducted by an applicant in an eligible area at a specific facility: PROVIDED, That the applicant's average full-time qualified employment positions at the specific facility will be at least fifteen percent greater in the year for which the credit is being sought than the applicant's average full-time qualified employment positions at the same facility in the immediately preceding year.

(b) "Eligible business project" does not include any portion of a business project undertaken by a light and power business as defined in RCW 82.16.010(5) or that portion of a business project creating qualified full-time employment positions outside an eligible area or those recipients of a sales tax deferral under chapter 82.61 RCW.

(5) "Manufacturing" means all activities of a commercial or industrial nature wherein labor or skill is applied, by hand or machinery, to materials so that as a result thereof a new, different, or useful substance or article of tangible personal property is produced for sale or commercial or industrial use and shall include the production or fabrication of specially made or custom made articles. "Manufacturing" also includes computer programming, the production of computer software, and other computer-related services, and the activities performed by research and development laboratories and commercial testing laboratories.

(6) "Person" has the meaning given in RCW 82.04.030.

(7) "Qualified employment position" means a permanent full-time employee employed in the eligible business project during the entire tax year.

(8) "Tax year" means the calendar year in which taxes are due.

(9) "Recipient" means a person receiving tax credits under this chapter.

(10) "Research and development" means the development, refinement, testing, marketing, and commercialization of a product, service, or process before commercial sales have begun. As used in this subsection, "commercial sales" excludes sales of prototypes or sales for market testing if the total gross receipts from such sales of the product, service, or process do not exceed one million dollars.

Sec. 210. RCW 82.62.040 and 1988 c 41 s 4 are each amended to read as follows:

RCW 82.62.020 and 82.62.030 shall expire ((~~July 1, 1994~~)) January 1, 2002.

Sec. 211. RCW 82.60.020 and 1988 c 42 s 16 are each amended to read as follows:

Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Applicant" means a person applying for a tax deferral under this chapter.

(2) "Department" means the department of revenue.

(4)(a) "Eligible investment project" means that portion of an investment project which:

(i) Is directly utilized to create at least one new full-time qualified employment position for each three hundred thousand dollars of investment on which a deferral is requested; and

(ii) Either initiates a new operation, or expands or diversifies a current operation by expanding or renovating an existing building with costs in excess of twenty-five percent of the true and fair value of the plant complex prior to improvement; or

(iii) Acquires machinery and equipment to be used for either manufacturing or research and development if the machinery and equipment is housed in a new leased structure: PROVIDED, That the lessor/owner of the structure is not eligible for a deferral unless the underlying ownership of the buildings, machinery, and equipment vests exclusively in the same person.

(b) "Eligible investment project" does not include any portion of an investment project undertaken by a light and power business as defined in RCW 82.16.010(5) or investment projects which have already received deferrals under this chapter.

(5) "Investment project" means an investment in qualified buildings and qualified machinery and equipment, including labor and services rendered in the planning, installation, and construction of the project.

(6) "Manufacturing" means all activities of a commercial or industrial nature wherein labor or skill is applied, by hand or machinery, to materials so that as a result thereof a new, different, or useful substance or article of tangible personal property is produced for sale or commercial or industrial use and shall include the production or fabrication of specially made or custom made articles. "Manufacturing" also includes computer programming, the production of computer software, and other computer-related services, and the activities performed by research and development laboratories and commercial testing laboratories.

(7) "Person" has the meaning given in RCW 82.04.030.

(8) "Qualified buildings" means new structures used for manufacturing and research and development activities, including plant offices and warehouses or other facilities for the storage of raw material or finished goods if such facilities are an essential or an integral part of a factory, mill, plant, or laboratory used for manufacturing or research and development. If a building is used partly for manufacturing or research and development and partly for other purposes, the applicable tax deferral shall be determined by apportionment of the costs of construction under rules adopted by the department.

(9) "Qualified employment position" means a permanent full-time employee employed in the eligible investment project during the entire tax year.

(10) "Qualified machinery and equipment" means all new industrial and research fixtures, equipment, and support facilities that are an integral and necessary part of a manufacturing or research and development operation. "Qualified machinery and equipment" includes: Computers; software; data processing equipment; laboratory equipment; manufacturing components such as belts, pulleys, shafts, and moving parts; molds, tools, and dies; operating structures; and all equipment used to control or operate the machinery.

(11) "Recipient" means a person receiving a tax deferral under this chapter.

(12) "Research and development" means the development, refinement, testing, marketing, and commercialization of a product, service, or process before commercial sales have begun. As used in this subsection, "commercial sales" excludes sales of prototypes or sales for market testing if the total gross receipts from such sales of the product, service, or process do not exceed one million dollars.

Sec. 212. RCW 82.60.050 and 1988 c 41 s 5 are each amended to read as follows:

RCW 82.60.030 and 82.60.040 shall expire ((~~July 1, 1994~~)) January 1, 2002.

Sec. 213. RCW 82.61.010 and 1988 c 41 s 1 are each amended to read as follows:

Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Applicant" means a person applying for a tax deferral under this chapter.

(2) "Person" has the meaning given in RCW 82.04.030.

(3) "Department" means the department of revenue.

(4) "Eligible investment project" means:

(a) Construction of new buildings and the acquisition of new related machinery and equipment when the buildings, machinery, and equipment are to be used for either manufacturing or research and development activities, which construction is commenced prior to December 31, ((~~1994~~)) 2001; or

(b) Acquisition prior to December 31, ((~~1994~~)) 2001, of new machinery and equipment to be used for either manufacturing or research and development if the machinery and equipment is housed in a new leased structure: PROVIDED, That the lessor/owner of the structure is not eligible for a deferral unless the underlying ownership of the buildings, machinery, and equipment vests exclusively in the same person; or

(c) Acquisition of all new or used machinery, equipment, or other personal property for use in the production or casting of aluminum at an aluminum smelter or at facilities related to an aluminum smelter, if the plant was in operation prior to 1975 and has ceased operations or is in imminent danger of ceasing operations for economic reasons, as determined by the department, and if the person applying for a deferral (i) has consulted with any collective bargaining unit that represented employees of the plant pursuant to a collective bargaining agreement that was in effect either immediately prior to the time the plant ceased operations or during the period when the plant was in imminent danger of ceasing operations, on the proposed operation of the plant and on the terms and conditions of employment for wage and salaried employees and (ii) has obtained a written concurrence from the bargaining unit on the decision to apply for a deferral under this chapter; or

(d) Modernization projects involving construction, acquisition, or upgrading of equipment or machinery, including services and labor, which are commenced after May 19, 1987, and are intended to increase the operating efficiency of existing plants which are either aluminum smelters or aluminum rolling mills or of facilities related to such plants, if the plant was in operation prior to 1975, and if the person applying for a deferral (i) has consulted with any collective bargaining unit that represents employees of the plant on the proposed operation of the plant and the terms and conditions of employment for wage and salaried employees and (ii) has obtained a written concurrence from the bargaining unit on the decision to apply for a deferral under this chapter.

(6) "Research and development" means the development, refinement, testing, marketing, and commercialization of a product, service, or process before commercial sales have begun.

(7) "Buildings" means only those new structures used for either manufacturing or research and development activities, including plant offices and warehouses or other facilities for the storage of raw materials or finished goods if such facilities are an essential or an integral part of a factory, mill, plant, or laboratory used for manufacturing or research and development purposes. If a building is used partly for manufacturing or research and development and partly for other purposes, the applicable tax deferral shall be determined by apportionment of the costs of construction under rules adopted by the department.

(8) "Machinery and equipment" means all industrial and research fixtures, equipment, and support facilities that are an integral and necessary part of a manufacturing or research and development operation. "Qualified machinery and equipment" includes computers; software; data processing equipment; laboratory equipment; manufacturing components such as belts, pulleys, shafts, and moving parts; molds, tools, and dies; operating structures; and all equipment used to control or operate the machinery. For purposes of this chapter, new machinery and equipment means either new to the taxing jurisdiction of the state or new to the certificate holder. Used machinery and equipment may be treated as new equipment and machinery if the certificate holder either brings the machinery and equipment into Washington or makes a retail purchase of the machinery and equipment in Washington or elsewhere.

(9) "Qualified employment position" means a permanent full-time employee employed in the eligible investment project during the entire tax year.

(10) "Recipient" means a person receiving a tax deferral under this chapter.

(11) "Certificate holder" means an applicant to whom a tax deferral certificate has been issued.

(12) "Operationally complete" means constructed or improved to the point of being functionally useable for the intended purpose.

(13) "Initiation of construction" means that date upon which on-site construction commences.

Sec. 214. RCW 82.61.040 and 1988 c 41 s 2 are each amended to read as follows:

RCW 82.61.020 and 82.61.030 shall expire ((~~July 1, 1994~~)) January 1, 2002.

Sec. 215. RCW 82.61.070 and 1988 c 41 s 3 are each amended to read as follows:

The department and the department of trade and economic development shall jointly report to the legislature about the effects of this chapter on new manufacturing and research and development activities in this state. The report shall contain information concerning the number of deferral certificates granted, the amount of sales tax deferred, the number of jobs created and other information useful in measuring such effects. Reports shall be submitted by January 1, 1986, and by January 1 of each year through ((~~1995~~)) 2003.

NEW SECTION. Sec. 216. A new section is added to chapter 82.08 RCW to read as follows:

(1) The tax levied by RCW 82.08.020 shall not apply to the retail sale of building materials used in the remodeling or expansion of a commercial or industrial structure or to the labor used to incorporate such building materials into real estate.

(2) In order to qualify for the exemption of retail sales tax on materials or labor under this section, the commercial or industrial structure must be located in a designated neighborhood reinvestment area under section 103 of this act.

(3) The department of revenue, in consultation with the department of community development, shall adopt rules specifying the administrative procedures applicable to applicants for exemption from retail sales tax on materials or labor, the form, manner, and time in which applications shall be filed, the information to be contained therein, and criteria for the approval or denial of requests for the exemption from retail sales tax on materials or labor under this chapter. The rules shall apply to both the department of revenue and the department of community development.

(4) The department of revenue shall grant an exemption from retail sales tax on materials or labor for commercial or industrial structures that are approved by the department of community development. The department of revenue shall keep a running total of exemptions granted under this section and section 217 of this act during each fiscal biennium. The department of revenue shall not allow any exemption that would cause the total tabulation for a biennium to exceed two hundred fifty thousand dollars.

(5) This section shall expire January 1, 2002.

NEW SECTION. Sec. 217. A new section is added to chapter 82.12 RCW to read as follows:

(1) The provisions of this chapter shall not apply in respect to the use of building materials used in the remodeling or expansion of a commercial or industrial structure or to the labor used to incorporate such building materials into real estate.

(2) In order to qualify for the exemption granted by this section, the commercial or industrial structure must be located in a designated neighborhood reinvestment area under section 103 of this act.

(3) The department of revenue, in consultation with the department of community development, shall adopt rules specifying the administrative procedures applicable to applicants for the tax exemption under this section, the form, manner, and time in which applications shall be filed, the information to be contained therein, and criteria for the approval or denial of requests for the tax exemption under this chapter. The rules shall apply to both the department of revenue and the department of community development.

(4) This section shall expire January 1, 2002.

PART III -- COMMUNITY REINVESTMENT AND PRIVATE INVESTMENT

Subpart A - Deposit of Surplus State Funds

NEW SECTION. Sec. 301. (1) No later than fifteen days after receipt of a written evaluation under the federal community reinvestment act (12 U.S.C. Sec. 2901 et seq.) each qualified public depository under the provisions of chapter 39.58 RCW shall submit to the Washington public deposit protection commission a copy of such written evaluation.

(2) Only those qualified public depositories assigned a rating of satisfactory or better shall be eligible to receive deposits under the provisions of chapter 43.86A RCW. Those qualified public depositories assigned a rating less than satisfactory shall be notified by the Washington public deposit protection commission that a failure to receive at least a rating of satisfactory, at the next written evaluation, will make the qualified public depository ineligible to receive deposits under chapter 43.86A RCW.

(3) Those qualified public depositories assigned less than satisfactory ratings for two consecutive evaluations shall be ineligible to receive deposits under the provisions of chapter 43.86A RCW, until the performance of the qualified public depository in meeting the community credit needs is determined to be at least satisfactory by the Washington public deposit protection commission.

NEW SECTION. Sec. 302. The Washington public deposit protection commission shall compile community reinvestment act ratings required under the federal community reinvestment act (12 U.S.C. Sec. 2901 et seq.). The Washington public deposit protection commission shall make this information available to the public.

Subpart B - Linked Deposit Program

NEW SECTION. Sec. 303. (1) The legislature finds that:

(a) There are parts of communities throughout the state that are experiencing economic stagnation or decline;

(b) The unemployment and underemployment in these areas threaten the safety, health, and welfare of residents of these areas, decreasing the value of private investment and jeopardizing the sources of public revenue; and

(c) The revitalization of these areas requires the development of new business ventures and the stimulation of private investment.

(2) The legislature declares that it is the intent of the linked deposit program to provide capital to promote community economic development and job creation in designated neighborhood reinvestment areas by authorizing the state treasurer to operate a program which links state deposits to business and residential loans by financial institutions.

NEW SECTION. Sec. 304. (1) The state treasurer shall establish a linked deposit program for investments in certificates of deposit in Washington financial institutions. As a condition of participating in the program, financial institutions must make qualifying loans as provided in section 305 of this act. Each certificate of deposit purchased by the state treasurer shall be equal to the amount of the qualifying loan made by the financial institution. The state treasurer is authorized to set interest rates on certificates and on qualifying loans consistent with the intent of sections 303 through 306 of this act and sound financial practices.

(2) Qualifying loans under the linked deposit program are those which:

(a) Are made in designated neighborhood reinvestment areas as defined in section 102 of this act;

(b)(i) Are made to a small business with a majority of employees in the state or (ii) are residential mortgage loans for single-family or multifamily housing that is affordable to low-income households as defined in RCW 43.185A.010; and

(3) In setting interest rates on certificates, the state treasurer shall offer rates so that a two percent preference in lending will be given to businesses engaged in manufacturing, export, providing services for sale outside the state, or residential mortgage lending.

NEW SECTION. Sec. 305. The state and those acting as its agents are not liable in any manner for payment of the principal or interest on qualifying loans under the linked deposit program. Any delay in payments or default on the part of the borrower does not in any manner affect the deposit agreement between the financial institution and the state treasurer.

NEW SECTION. Sec. 306. The state treasurer may use up to fifty million dollars per year of state funds for the linked deposit program.

PART IV -- EMPLOYMENT OF NEIGHBORHOOD RESIDENTS

NEW SECTION. Sec. 401. A business receiving assistance under chapter . . . , Laws of 1993 (this act) shall seek to employ as many of its employees as possible from the designated neighborhood reinvestment area the assistance is related to, with a minimum goal of at least thirty percent of the employees from the respective designated neighborhood reinvestment area.

NEW SECTION. Sec. 402. The department shall require that local governments receiving financial assistance under chapter . . . , Laws of 1993 (this act) include a provision in their construction contracts for projects in neighborhood reinvestment areas, that require the contractor to increase outreach and recruitment efforts to employ as many of its employees as possible from the designated neighborhood reinvestment area the assistance is related to, with a minimum goal of thirty percent of the employees from the respective designated neighborhood reinvestment area.

PART V -- TECHNICAL PROVISIONS

NEW SECTION. Sec. 501. (1) Sections 1, 101 through 104, 401, and 402 of this act shall constitute a new chapter in Title 43 RCW.

(2) Sections 201 through 206 of this act are each added to chapter 82.04 RCW.

(3) Sections 301 and 302 of this act are each added to chapter 30.60 RCW.

(4) Sections 303 through 306 of this act are each added to chapter 43.84 RCW.

NEW SECTION. Sec. 502. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION. Sec. 503. Part and subpart headings as used in this act constitute no part of the law.

NEW SECTION. Sec. 504. This act may be known and cited as the "neighborhood reinvestment act.""